Glum North Americans weigh down CEO hopes

Widely diverging regional expectations emerge

By

WilliamL. Watts

DAVOS, Switzerland (MarketWatch) -- Fears of an economic downturn weighed down expectations for revenue growth among corporate bosses in North America and Europe, but have yet to dampen the growing confidence of CEOs from emerging economies, according to an annual survey of CEOs released on the eve of the annual gathering of elite politicians and business leaders in the Swiss Alps.

Overall, the annual PricewaterhouseCoopers Global CEO survey found that confidence was on the decline for the first time in five years, with 50% of CEOs "very confident" about revenue growth over the next 12 months, down from 52% the previous year.

But the survey points to widely diverging regional expectations, with CEOs from North America and Europe less confident, while top executives from emerging economies grew more confident about their prospects over the next 12 months.

"The possibility that the downturn could worsen into recession looms large for CEOs in established economies like the U.S. and Western Europe," said Samuel DiPiazza, PricewaterhouseCoopers global CEO, in a news release. "In the newly-emerged economies, CEO confidence remains strong, perhaps because they have experienced nothing but rapid expansion for a decade or more."

The question of whether the world economy can remain insulated from a major U.S. slowdown - a scenario known as "decoupling" - is expected to be widely debated at this year's annual meeting of the World Economic Forum, which gets under way Wednesday.

With economists and indicators flashing warning signs about a potential U.S. recession, it's no surprise that North American CEOs - who last year were the most confident about growth - are less optimistic.

The survey found only 35% of CEOs in North America were "very confident" about growth, down from 54% last year. In Western Europe, 44% of top executives were "very confident," down from 52% in the previous year.

Exuberance in the biggest emerging economies

Executives in the Asia Pacific region had a different story to tell, with 56% "very confident" of growth versus 49% a year ago. A similar story was seen in Latin America (56%) and Central and Eastern Europe (55%), where confidence readings were up slightly from a year ago.

Executives in the biggest emerging economies were among the world's most exuberant. Seventy-three percent of Russian executives termed themselves "very confident" of revenue growth, more than double the 35% that felt the same way in January 2007. That's also a big pick-up in China, where 60% held a similar level of confidence last year.

Executives in India were the most upbeat of all, with 90% "very confident" of revenue growth, the survey found.

Overall, few executives were outright pessimistic. The survey found that 40% of all executives were "somewhat confident" of growth in the next year, while 7% were "not very confident, and only 2% were "not confident at all." One percent said they didn't know or refused to answer.

Over the next three years, 42% of top executives were "very confident" of growth, while 49% described themselves as "somewhat confident." Six percent said they were "not very confident" of growth over the three-year period, while 1% were "not confident at all."

Fears of economic downturn top worries about overregulation

CEOs cited a potential economic downturn as the major threat to business growth prospects in the next year, the first time such a concern has topped the survey's findings in its 11-year history, PricewaterhouseCoopers said.

Overregulation - a perennial top worry for elite executives - was mentioned as a top concern by 59% of CEOs, the survey found, down from 73% in the 2007 survey.

The survey also pointed to a boost in international deal-making. Twenty-four percent of top executives said their firm had completed at least one cross-border merger or acquisition in the past 12 months, while 31% said they planned to do a transaction in the coming year.

CEOs in the Asia Pacific region were the most eager to engage in cross-border M&A activity, the survey found. Only 23% of Asia Pacific CEOs had completed a deal in the past year, but 34% -- more than any other region - said they planned to do so in the next 12 months.

The results were based on 1,150 interviews with CEOs in 50 countries during the last quarter of 2007, PricewaterhouseCoopers said.

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